Lazard Global Total Return and Income Fund Inc. (NYSE:LGI) is a closed-end fund that offers investors the opportunity to earn a high level of current income from a diverse portfolio of equity securities from around the world. Unlike many other high-yielding closed-end funds that focus on fixed-income securities, LGI’s investment in equities provides a better hedge against inflation and helps protect the purchasing power of investors’ wealth.
In a recent analysis, it was highlighted that the current inflationary pressures are still a concern, especially as core inflation has shown an increase on a month-over-month basis. This raises the possibility of an interest rate cut in response to economic weakness, which could potentially reignite inflation and lead to a stagflation scenario reminiscent of the 1970s. During that period, domestic common equities did not perform well, underscoring the importance of diversifying investment portfolios across different nations and currencies.
Recent projections from the Congressional Budget Office emphasize the importance of diversification, as fiscal deficits are expected to impact the strength of the U.S. dollar compared to other currencies. Central banks worldwide are recognizing this trend, with record levels of gold purchases in 2022 and 2023. LGI’s ability to invest in foreign securities enables investors to benefit from currency appreciation against the dollar, potentially generating capital gains even if equity markets remain stagnant.
Goldman Sachs recently released a report on the potential market outcomes of the upcoming elections, highlighting the outperformance of foreign assets in three out of four possible scenarios. This underscores the value of including a fund like LGI in a portfolio to gain exposure to international markets during uncertain times.
Despite a recent period of strong global equity market performance, LGI has not performed as well as expected, with only a modest appreciation since the last analysis. However, when considering the distributions paid out by the fund, the total return performance surpasses that of benchmark indices like the S&P 500 and MSCI World Index.
The fund’s primary objective is to provide investors with a high level of total return through a diversified portfolio of equity securities. The majority of its assets are invested in common stocks, with a focus on both U.S. and non-U.S. markets, including emerging markets. While the fund maintains a significant exposure to the United States, it also provides exposure to international markets, offering a balanced approach for investors.
Leverage is utilized by LGI to enhance yield and total return, with leveraged assets comprising around 30% of the portfolio. While this level of leverage is higher than some peers, it remains within a reasonable range, providing potential for increased volatility but also higher returns.
The fund pays a monthly distribution with a current yield of 10.52%, outperforming many of its peers in the global equity sector. While distribution history has shown some variability, the fund’s ability to cover distributions through net investment income and realized gains indicates a financially stable position.
Shares of LGI are currently trading at a discount to net asset value, presenting an attractive opportunity for investors seeking exposure to foreign markets. Despite recent underperformance, the fund’s potential for capital appreciation and income generation makes it a compelling option for income-seeking investors looking to diversify their portfolios.
In conclusion, LGI offers investors the potential for high yield and outperformance in foreign assets. By leveraging a diverse portfolio of equity securities from around the world, the fund provides a balanced approach to income generation and capital appreciation. Despite recent market fluctuations, LGI remains a strong option for investors looking to navigate uncertain economic conditions and capitalize on opportunities in global markets.